Risk Preferences of Gender-Diverse Boards: Evidence from CEO Debt-like Compensation

We hypothesize that gender-diverse boards manage CEO risk-taking preferences through the debt-like component of CEO compensation. We provide empirical evidence of a strong positive association between the proportion of independent female directors and debt-like pension compensation for a sample of US firms. Our key results are robust to a least-squares framework that includes firm fixed effects to address potential omitted variable bias, and we also find evidence that higher proportions of independent female directors are associated with lower CEO option compensation and more intensive use of restricted stock grants. We obtain corroborating results from a difference-in-differences approach using California's 2018 board gender quota law (SB 826) as a quasi-experiment. Consistently, gender-diverse boards reduce the cost of debt among firms that are closer to financial distress and for longer maturity bond issues.